The Guardian view on industrial strategy: hot air but no liftoff
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Version 0 of 1. British politicians have been talking about a modern industrial strategy for long enough that the idea counts as neither original nor radical. But if the government makes real progress towards enacting such a strategy – setting into reverse patterns of short-termism, weak productivity, trade deficits and regional imbalances – it will be a significant achievement. The launch of a green paper is intended by Downing Street to signal that activist industrial policy is a pillar of the new thinking. It is one of the ways in which this team hopes to distinguish its conservatism from the more libertarian Toryism that views any government intervention with suspicion. The approach involves greater willingness to use public money for investment in infrastructure, research and development alongside a commitment to regional development through devolution of powers to city authorities. It eschews direct subsidy for companies for fear of backing losers, preferring to bolster some sectors where Britain already does well – the creative industries and life sciences – and align with others that everyone believes will be big in the future: low-emission vehicles, and robotics. The plan is for “high-paid, high-skilled jobs for the future”. But there is nothing in this green paper for the low-paid, low-skilled jobs that will persist – however insecure they become – all through this glorious future. Nor does it mention the most important influence on our future: the green paper’s list of reasons foreigners have invested in Britain does not include membership of the single market. This question was raised by the commitment the government made to Nissan to ensure jobs remained in the UK, but was unanswered today. The theory is that Britain can maintain its traditions of enthusiasm for the free market but with a state that is less squeamish when it comes to nurturing fledgling enterprises, getting involved when it looks as if markets have failed and, perhaps most drastically, stepping in if foreign interest in some strategic asset is deemed counter to the national interest. This sounds like a departure from the laissez-faire attitudes that marked Britain’s post-Thatcher consensus. In reality, the shift has been gradual. Even in the peak Thatcher years, Michael Heseltine was pursuing activist policies for urban regeneration. Interventionists in the cabinet entourage now cite Lord Heseltine as an inspiration. The 2007-08 financial crisis made an irrefutable case against the old hands-off approach, but it took most of a decade for that insight to penetrate the political mainstream. In the years of coalition government, the Liberal Democrats – picking up from New Labour’s Peter Mandelson – pushed for a more vigorous industrial strategy, although their occasional successes were overshadowed by the dominant economic narrative of fiscal contraction. The Treasury is still suspicious, but it has less influence with No 10 in such matters than before. It is notable also that Sajid Javid, an instinctive state-shrinking Thatcherite, has gone from the business department. Instead, Greg Clark, who is far more open-minded about market failure, is pushing the strategy. As with much else there is an issue when stirring words are expressed only as intention. This should also be met with wariness. The principle of strategic investment and regional rebalancing is easier to extol than to realise. The fiscal path signalled in last year’s autumn statement is still perilously narrow. There is room for symbolic subsidies but not the kind of shock-and-awe investment that would signal a drastic change of course. But most worrying is the evidence that Theresa May is unwilling to confront the faction of her party that is most hostile to state activism, which happens to also be the faction pushing for the severest rupture from the European Union. It does not bode well, for example, that Mrs May is prepared to threaten that Britain will seek to undercut European neighbours with corporate tax cuts and minimal regulation as part of its Brexit negotiation strategy. This readiness to embrace a turbo-libertarian model so apparently antithetical to the more nurturing state she claims to prefer implies a worrying plasticity of commitment and principle. If the government is serious about rehabilitating the role of the state in pursuit of a fairer society and a stronger economy, ministers would make this a non-negotiable feature of their Brexit strategy, too. At the moment, it all looks too vague and dispensable to inspire lasting confidence. |